Rating Economic Freedom Across Provinces

NEEPAWA, Man. — Freedom isn’t something the average Manitoban thinks about an awful lot. We live in Canada, a free country, with three levels of democratically elected governments. We have the freedom to live and work wherever we want to. We have rights and freedoms guaranteed by our constitution and protected by our courts. We can assemble wherever and whenever we want. Throughout the world, wars are taking place, but they are far from our borders.

Even within our free countries, there are different levels of economic freedom. On December 15, the Fraser Institute released its Economic Freedom of North America report. This is the 11th edition of the report, which measures the extent to which the policies of individual provinces and states in Canada, the United States and Mexico are supportive of economic freedom— the ability to act in the economic sphere free of undue restrictions.

According to the report, the freest economies have minimal government interference, instead, relying upon personal choice and markets to answer basic economic questions, such as what is produced, how it’s produced, how much is produced and for whom production is intended. As governments impose restrictions on these choices, there is less economic freedom. The study primarily looks at three areas: size of government, discriminatory taxation and labor-market freedom.

The report rates individual states and provinces on a 10-point scale at the subnational (provincial) level and the all-government (national) level, to allow for comparisons within a country and between countries.

The report does caution that the findings are based on 2013 data, the most recent year for which all of the required national data is available. A lot has changed in the last two years, especially in Alberta.

Interestingly, according to the all-government rankings, the top three jurisdictions are in western Canadian, with Alberta in first with a ranking of 8.1, British Columbia in second at 7.9 and Saskatchewan in third at 7.8. The lowest ranked Canadian provinces were Prince Edward Island and Quebec, which both had a rating of 7.4. The lowest-ranked state in the United States was Delaware, which was ranked in 60th place, out of all jurisdictions in Canada, the US and Mexico, with 7.3.

Looking at the subnational level, the most economically free province was Alberta with a ranking of 8.4, in second was British Columbia with 6.9, followed by Saskatchewan at 6.5. At the other end of the spectrum was Quebec at 3.6, followed by Manitoba, Nova Scotia and Newfoundland and Labrador, all tied at 5.8.

So how did Manitoba fare in each of the categories? Area 1 looks at government spending, including consumption, transfers and subsidies. Here, Manitoba earned a rating of 7.0, putting the province in the middle of the pack. Area 2 looks at taxes, including payroll, income and property taxes. In this area, Manitoba was at the lower end of the provinces, with a rating of 5.8. Area 3 looks at regulation, including minimum wage, government employment and union involvement. Here, our ranking was 7.8, tied with three other province for the lowest score. These scores shouldn’t be a big surprise, after all, 2013 saw a PST increase, a cap on the farmland school tax rebate and a $0.20 increase to minimum wage.

So why does this matter? It matters because economic freedom is vitally important in the larger scheme of things. It has tended to be highly correlated with economic measures that we care deeply about, such as economic growth, income levels and entrepreneurial activity. When economic freedom is high, citizens tend to be better off, and that’s something we all care about.